Analysis: Trucking continues to take freight from skies

Friday, January 11, 2013

A number of factors ranging from the impending U.S. hours of service requirements to a lack of drivers on the road will lead to a tightening of trucking capacity this year, but even with fewer trucks, the industry will continue to take market share from air freight carriers.
Chris Connell, president of Commodity Forwarders Inc., a perishables specialist based in Los Angeles, has seen a steady decline in his domestic air freight use over the past 10 years. In the current market, he rarely ships goods as air cargo except for the occasional seafood or sushi shipment traveling from coast to coast. Even if trucking regulations put a squeeze on capacity and rates go up, he can’t see turning to air freight as a solution.
“The gap between the costs of moving product by air cargo versus truck that has been widening over the years might tighten as truck cost increase due to driver shortages, but not enough to make cover the difference,” he said.
The move toward smaller domestic passenger planes with limited cargo holds has also made air cargo less than an attractive option to shippers. Smaller holds means that shippers with large shipments might have to break them up across a few flights, creating a bigger logistical headache than simply using trucks.
Domestic air carriers are at an obvious disadvantage when competing with trucking — planes don’t have as great of a speed edge over domestic trucks as they do when compared to international ocean freight — and that doesn’t seem likely to change any time soon. Connell suggested, however, that carriers can take some steps to avoid losing even more business to trucking companies this year.
“(Carriers need to) have a realistic approach to profit and make sure they are investing in service-quality initiatives to prevent delays,” he said. “Delays in cargo completely kill the value proposition of quality versus price.”
Smart shippers, he maintained, will simply use trucking for most of their supply chain needs, only turning to air freight to fill emergency gaps. In a capacity-constrained trucking market, this will take a bit of advance planning and the desire to optimize a shipper’s supply chain.
“If you can plan better, you’re going to go by truck because it’s such a huge savings. You’re going to fill inventory gaps by air, but it all comes down to pre-planning,” he said, adding that simply deciding to switch to trucking at the last minute without creating a plan isn’t good enough in the current market.
“Someone who asks for eight trucks at the last second,” he said, “is going to be more disappointed than someone who is strategically planning what’s going to happen." - Jon Ross